MEMORANDUM

TO:	Dockets for rulemakings, "National Emission Standards for Hazardous Air Pollutants for the Surface Coating of Metal Furniture (Subpart RRRR)" (EPA-HQ-OAR-2017-0669)
DATE:		February 5, 2018
SUBJECT:	Economic Impact and Small Business Screening Assessments for Proposed Amendments to the National Emission Standards for Hazardous Air Pollutants for the Surface Coating of Metal Furniture (Subpart RRRR)

Introduction
      
This document summarizes economic impact and small business screening assessments for the proposed amendments to the National Emission Standards for Hazardous Air Pollutants for the Surface Coating of Metal Furniture (40 CFR part 63, Subpart RRRR) based on the residual risk and technology review. The potential costs estimated for the proposed amendments to subpart RRRR are associated with familiarization with the rule requirements and changes to the Startup, Shutdown, and Malfunction (SSM) requirements for all sixteen affected entities. Facilities will be required to use high efficiency coating application methods; meet the standards during startup, shutdown and malfunction; and use the electronic reporting tool for annual reports, performance testing, and notifications. A discussion of the regulatory options evaluated and their detailed cost estimates is provided in the December 12, 2017 technical memorandum entitled "Costs/Impacts of the Proposed 40 CFR Part 63 Subparts NNNN, OOOO and RRRR Monitoring Review Revisions," available in the docket.

Costs of the Proposed Amendments

This proposal will require that the emission standards be met at all times, including during startup, shutdown, and malfunction, and will require the use of the electronic reporting tool for annual reports, performance testing, and notifications. The burden associated with this rule is the recordkeeping requirement for startup, shutdown, and malfunction, and the requirement that facilities use the electronic reporting tool. While the electronic reporting requirement is expected to be no more burdensome than the current reporting requirement, there are costs associated with becoming familiar with the rule requirements and re-evaluating previously developed SSM record systems. The one-time total cost of this rule is estimated to be $32,000 for the sixteen affected entities.

Facilities would also be required to use high efficiency coating application methods such as high-volume low-pressure (HVLP) spray guns, air assisted airless spray, and electrostatic spray. As noted in the November 27, 2017 technical memorandum entitled "Technology Review for Surface Coating Operations in the Metal Furniture Category," available in the docket, the majority of metal furniture surface coating facilities subject to subpart RRRR are located in California, Delaware, Florida, Georgia, and Illinois. These states currently require HVLP or equivalent coating application technology to limit VOC emissions. It is likely that the metal furniture surface coating facilities located in other states are also using high-efficiency application equipment for spray applied coatings as a cost saving measure to reduce coating and spray booth filter consumption and to reduce the amount of solid waste generated in the form is used spray booth filters. (For example, the permits for three facilities in other states described the coating operations as using HVLP and electrostatic application.)

If a metal furniture surface coating facility were required to replace any of their conventional coating spray guns with a higher efficiency spray guns, such as an HVLP spray gun, an earlier EPA analysis estimated  the capital cost to be  approximately $700 per gun. The analysis estimated these costs for an industrial-quality HVLP spray gun and accessories (e.g., larger diameter hose, gauges, extra air caps), based on vendor information. Assuming a 10-year life and a 7 percent interest rate, the annualized capital cost per HVLP gun would be about $100. However, these potential costs would be offset by savings in coating costs, filter costs, and in the cost of solid waste disposal for used paint booth filters that would result from increased coating transfer efficiency and the reduced generation of coating overspray, compared to conventional spray guns. As a result, we assumed that there are no net costs associated with this provision.

Economic Impacts

Economic impact analyses focus on changes in market prices and output levels. If changes in market prices and output levels in the primary markets are significant enough, impacts on other markets may also be examined. Both the magnitude of costs needed to comply with a proposed rule and the distribution of these costs among affected facilities can have a role in determining how the market will change in response to a proposed rule. For the purpose of analyzing the impact on firms, the per-facility costs for familiarization with the rule requirements and changes to the SSM requirements were compared to the annual sales revenue per affected entity to estimate the total burden for each facility. The total costs associated with Subpart RRRR's proposed requirements range from 0.00007 to 0.02 percent of annual sales revenues per affected entity. These costs are not expected to result in a significant market impact, regardless of whether they are passed on to the purchaser or absorbed by the firms.

The EPA prepared a small business screening assessment to determine if any of the identified affected entities are small entities, as defined by the U.S. Small Business Administration (SBA). The affected facilities that perform surface coating of metal furniture fall into one of the following North American Industry Classification System (NAICS) codes: 335121, Residential Electric Lighting Fixture Manufacturing; 337127, Institutional Furniture Manufacturing; 337214, Office Furniture (Except Wood) Manufacturing; 337215, Showcase, Partition, Shelving, and Locker Manufacturing; or 423850, Service Establishment Equipment and Supplies Merchant Wholesalers. The SBA defines small entities in these NAICS codes as having 750 or fewer employees, 500 or fewer employees, 1,000 or fewer employees, 500 or fewer employees, or 100 or fewer employees, respectively. 
Six of the affected facilities were identified as small entities. However, the annualized costs associated with Subpart RRRR's proposed requirements for these six affected small entities range from 0.001 to 0.02 percent of annual sales revenues per affected entity. Therefore, there are no significant economic impacts on a substantial number of small entities (SISNOSE) from these proposed amendments.
